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PHIL BLACK, CNN INTERNATIONAL CORRESPONDENT: And now this breakthrough as well. Police say that are continuing to work and investigate to find out precisely all the people who were involved in this operation, Chris.

CHRIS CUOMO, CNN ANCHOR: All right, Phil, thank you for that.

Now, we know Russia says it has worked hard to ensure that Olympic athletes and visitors to Sochi will be safe with a, quote, "ring of steel" in place around the stadium. Still, U.S. officials have identified a number of specific threats to the Sochi games. The head of the House intelligence committee says tells CNN the real danger is in the area outside Sochi.

KATE BOLDUAN, CNN ANCHOR: Also this morning, Syria is quickly becoming a base for terrorists to attack the U.S. That's the warning from the nation's top intelligence chief. CIA Director John Brennan telling the House intelligence committee as well Al Qaeda is using Syria to recruit new members and launch worldwide attacks. And Director of National Intelligence James Clapper saying he's never seen more global terror threats at any one time in his 50 plus years of service.

MICHAELA PEREIRA, CNN ANCHOR: The military is investigating more accusations of cheating on exams. The Navy is looking into whether sailors training on nuclear reactors were cheating on written at the times. Official says the number of sailors involved could be between 12 and 30. This is the third time in three weeks branches of the military have addressed charges of cheating on proficiency exams.

BOLDUAN: Breaking overnight, a string of bombs rocked Baghdad during rush hour killing at least 25 people, injuring 30 more, three blasts, all happening near main checkpoints of the heavily fortified green zone which houses Iraqi government buildings. The Iraqi government says more than 1,000 people lost their lives in January alone, the highest monthly toll in almost six years.

CUOMO: Right now outside your window, a horrible sight. Snow, sleet, and ice making conditions unbearable in the northeast, the region slammed with flight cancellations, icy roads, power outages. And 120 million people, 32 states from Wyoming to Maine feeling Mother Nature's wrath. We're going to start our weather coverage this morning meteorologist Chad Myers in New York's Central Park. What's the latest?

CHAD MYERS, AMS METEOROLOGIST: With this ice storm coming down right now, we may have more flight cancellations today than we've had in a very long time. Take a look at the radar. We have snow all the way from New England all the way back to Buffalo. South of there is where we have that pink area. That pink is a significant ice event all the way from about Dubois, just south of there, right along to Harrisburg, Lancaster, and into New York City.

It is sleeting, it is raining now, and it is 31 degrees. It is 35 degrees above here at the top of the buildings. We had snow earlier, it was easy, but now it's an ice storm. Take a look at these amounts. We're going to see a foot of snow or more all the way literally from New England back into central New York and western New York. That might be the easy part. Sure you shovel it out and done. Bu the ice south of there, what we're getting now could be one-half to three- quarters of an inch piling up on these trees. These tree limbs are going to go down, power lines are going to come down as well. Kate?

BOLDUAN: More trouble ahead. Chad, thank you.

Yet again, the weather is wreaking havoc on air travel. More than 3,000 flights have been canceled since Tuesday. One plane in Kansas City is literally stuck in its tracks. CNN's Rene Marsh is live at Reagan National Airport right outside Washington with more on this angle of the weather story. Good morning, Rene.

RENE MARSH, CNN CORRESPONDENT: Good morning, Kate. You know, Chad hit it right. It is going to be bad if you are flying today. We've already surpassed the levels as far as cancellations from yesterday. Right now, 7:00 hour, we're talking about more than 2,000 cancellations and 2,000 delays. Things are far from rosy here at Reagan National Airport.

Take a look at this monitor. The problem airports, New York, New Jersey, Philadelphia, Boston, and Chicago, those are the ones seeing the most problems. And I want to show you this video, because it's not just planes that aren't able to take off, also planes coming in. This one in Kansas City, this Southwest Airline plane went into a snow bank as it was taxiing to the terminal. Problems there. We can tell you that the passengers were able to deplane safely. But it shows you a full picture as to how this weather is really creating major problems for air travel.

PEREIRA: And as always, Rene, we tell people, call the airline, check online, check Twitter if you have to fly or travel. Thanks for that report.

After two years, there's finally a farm bill to guide U.S. food policy, the Senate giving final approval to the nearly $1 trillion measure and sending it onto the president. He plans to sign it Friday. The bill expands crop insurance for farmers but cuts direct payments, and it reduces food stamp spending by $8 billion over the ne next decade.

<07:05:10> BOLDUAN: So is Obamacare costing jobs? That question is coming after the release of a new Congressional Budget Office report that says the president's signature healthcare law could reduce the workforce by more than 2 million jobs. It's a complex issue, I'll tell you that. Today the head of the CBO is set to testify on Capitol Hill as the Obama administration is pushing back very hard on this. CNN's Jim Acosta is at the White House with much more. Can you explain this, Jim, because it's more complex that just the headline, of course?

JIM ACOSTA, CNN WHITE HOUSE CORRESPONDENT: It is complicated, Kate. I will do my best. Good morning. Any time you have a government report that comes out that says Obamacare and jobs, you can bet there will be fireworks. And that's what happened when the CBO report came out.

What the CBO is saying basically is that over the next 10 years you're going to see 2.5 million fewer Americans in the labor market as a result of Obamacare. And the CBO report says this is not jobs lost. This is not the equivalent of a company's cutting jobs. What's going on here is they see about 2.5 million Americans over the next 10 years basically cutting back on their hours and temporarily staying out of their jobs from time to time in order to qualify for subsidies under Obamacare to allow them to buy insurance. And if you add up the cumulative effect of that, it's about 2.5 million jobs by the year 2024.

Now Republicans came out, they pounced immediately and said here's another example of Obamacare hurting jobs. But the White House says, no way, that is not the case.

BOLDUAN: Is the White House giving you anymore response than no way, that's not case? Because right now this gives a lot of fire to Republican charges that Obamacare is a job killer. The White House is going to have to push harder than that, right?

ACOSTA: That's right. They did way more than that yesterday at the briefing at the White House. They put out a chair of the Council of Economic Advisers, Jason Furman, to basically lay out the case and point to basically what the CBO is saying. But he threw out a hypothetical. He said let's say we were to get rid of Social Security -- and the White House is not throwing that out as an idea, but if you got rid of Social Security, you would have more 95-year-olds in the marketplace. That would add more jobs to the economy, but that might not necessarily be good economic policy Furman said.

The same sort of thing is going on here. If you offer incentives for people to buy insurance under Obamacare, there may be some people who say, you know what, I'm going to cut back on my hours, I may not stay in this job in order to have more insurance. And that effect is basically what adds up to this 2.5 million jobs. All of this is going to play out at a Congressional hearing later this morning. The head of the CBO will be testifying at a House budget committee hearing. Kate and Chris?

BOLDUAN: Jim, thank you so much. CUOMO: We have more news this morning out of D.C. The White House is dialing lack drone strikes in Pakistan according to "The Washington Post." This follows a request for restraint from the Pakistani government as it pursues peace talks with the Taliban. Let's bring in Barbara Starr. She's tracking these developments live from the Pentagon. Drone strikes so central to the controversy going on in Pakistan. What do we believe this means, Barbara?

BARBARA STARR, CNN PENTAGON CORRESPONDENT: Chris, we have not confirmed independently the details in the "Post" article. But what appears to be going on here has happened before. Drone strikes in Pakistan have ebbed and flowed over time. Behind the scene what's really happening is Republicans in Congress are objects to President Obama's tightening of the rules on drone strikes. The president has set new rules in the last several months, drone strikes only if the target appears to be a continuing eminent threat to the United States and there's no risk of civilian casualties.

Just yesterday, the chairman of the house intelligence committee, Republican Congressman Mike Rogers, challenged the U.S. intelligence community directly and said the president's policies have been a failure and that it is putting Americans at risk. Many in the intelligence community will tell you they've done so many strikes in Pakistan it's getting harder to find those targets. But strikes continue of course in places like Yemen and where there are other Al Qaeda enclaves.

BOLDUAN: Thank you so much, Barbara.

So also today, top retail executives returning to Capitol Hill for a second round of hearings over those recent credit card data acts. Tuesday, Target's CFO said his company was deeply sorry for the security breach that compromised the credit and debit card information of more than 100 million customers.

PEREIRA: While the rest of the country is facing snowstorms and low temperatures, California in the middle of a brutal draught that is threatening crops and livelihood. Researchers say it could be one of the top 10 worst droughts to hit California in 500 years. This drought hurts more than just California. It is also going to hurt your household budget. How? Christine Romans is at the magic wall to break it all down for us.

CHRISTINE ROMANS, CNN ANCHOR: Yes, they're calling it a mega drought, concerns of a mega drought. Two-thirds of California is classified now as an extreme or exceptional drought. Look at that map. Those are the most serious categories. A year ago, zero percent of the state was in that category.

<07:10:00>

This will hurt you even if you don't live in California. Why? There are 80,000 farms in California, more crops grown there than anyplace else in the country. It produces nearly half of the U.S. grown fruits, nuts, and vegetables. And some of the things you put in your grocery cart you can't get anywhere else, like 90 percent of the nation's supply of almonds, pistachios, walnuts, grapes, raisins, pomegranates, all grown in California, many of them water intensive, and water is in short supply.

It's not just these fruits and nuts. It's wine. It's beef, dairy. They're having a hard time grazing the cattle. That raises the price of everything. How high could prices go? Well, a vegetable crop specialist at U.C. Riverside told us this. This draught could raise your produce prices 10 percent over the next few months. The rest of the world really concerned about snow right now. In California very serious drought. You'll feel it at the grocery store.

CUOMO: That's what the scientists are telling us, Christine, that it's not just about global warming. In one way, it's about extremes. You've got big drought out there, big snow here. So that's what we're seeing right now.

We also have new developments this morning in that chemical spill that left 300,000 people without water in West Virginia. A criminal investigation is now underway. And an independent water test was completed at CNN's request to see if water is now safe. The result, trace levels of a dangerous chemical remain in both untreated river water, and tap water in at least two homes.

BOLDUAN: New this morning, Clay Aiken, best known as the season two runner-up of "American Idol," he announced on his website he is running for Congress. Aiken already shaking up the Democratic primary there. Attorney Houston Barnes reportedly plans to withdraw from the race today and support Aiken.

PEREIRA: Let's take a look at the papers. "New York Times," alleged fraud in an army recruiting program that cost taxpayers nearly $1000 million. Under the program, National Guard soldiers could earn up to $7,500 for a new recruit. Military investigators however, now say some took credit and cast for students who already planned to join. More than 1,200 people including civilians, officers, even two generals have been implicated.

In the "Boston Herald," Massachusetts allows some people with rap sheets to be cleared as potential foster parents, even with convictions of armed assault, drug trafficking, and, incredibly, soliciting sex from a minor. Governor Deval Patrick acknowledged the policy but said he has faith that state officials will weed out potential threats.

And in "The Salt Lake Tribune," the blame game over last week's decision to take away school lunch from dozens of kids in Utah, a preliminary report from the child nutrition director says procedures were not followed. Some parents say the report doesn't go far enough after kids had their lunches thrown away and replaced with fruit and milk.

CUOMO: Also breaking overnight, four people arrested in connection with the death of Philip Seymour Hoffman. Police say the suspects are believed to be connected with the drugs found at the actor's apartment. Let's bring in Lou Palumbo, a retired law enforcement officer, very well connected in this area. Lou, thank you for being here.

Two things. One is the drugs that they found in there they don't believe are of the variety of heroin that is a scourge in other states, killing a lot of people. But by looking at the bags, they very quickly moved and found guys they believe are the dealers. How did they make such a quick arrest?

LOU PALUMBO, RETIRED LAW ENFORCEMENT OFFICER: They did it through a number of way. One way, Chris, is through their confidential informants, plus their ability to follow this particular heroin strain which is germane primarily to New York at this point. So they connected the dots on this. It really wasn't that difficult. They had phone records. They had computer communications. They may have found notes that the young man wrote. But they're aware of what's going on in the streets. Now it's just an issue of finding one substance and tying it to the substances that they know are more commonly circulated.

BOLDUAN: Is it less about finding the people who sold the drugs specifically to Philip Seymour Hoffman and more about trying to fight this problem, the city seeing such a resurgence in the streets of heroin abuse?

PALUMBO: Yes, I think it's more the fact that we have a real problem on our hands once again similar to that in the '60s and '70s. There is a very strong resurgence. Unfortunately the demise of this young man has brought this into focus.

BOLDUAN: Right.

CUOMO: They're combining heroin with synthetic drugs now, maybe a cancer treatment drug to increase the high, but it makes it dangerous, and you have people who are already unstable doing their own chemistry, basically, it becomes much more lethal. Also something important to note, Lou, isn't it true that very often law enforcement is aware that dealers are operating in certain areas and they don't necessarily arrest them all the time, and that may account for how they got this done so quickly?

<07:15:00>

PALUMBO: You know, the approach to interdiction (ph) with narcotics is kind of like a building block. They're not looking to grab a guy with a key (ph) of coke or a bag of heroin.

BOLDUAN: Yeah, but 50 bags is a lot, though.

PALUMBO: Yeah but you know, if you put it in the big scheme of things, all we really do is turn people. We turn you. For example, if we catch you with 10 keys of coke, and we don't have a wire up on you or an open case, you give us an introduction with an under cover, you say listen you don't want me with 10 keys of coke, I got a guy moving a hundred, that's the direction you want to go. You continue pyramid to where you get to the real driving force behind this thing, which is generally outside of our country. CUOMO: Also a window into Hoffman's addiction, also. Yes, big stars, special person, celebrity, who was very garden variety in what he was doing. He was in a bodega using an ATM, talking to guys with messenger bags, pretty low level dealing.

BOLDUAN: How much time could these guys be doing?

PALUMBO: That's a very interesting question. Because there are a couple of tangential investigations going on here. We're trying to determine if the district attorney after apprehending these individuals is now going to charge them with complicity in his death. In other words, they used his death as the impetus to conduct an investigation to identify a source on the street. So they've made an arrest. The next part of the equation is are they now going to make a determination that they should prosecution them not just for drug possession or dealing, but were they complicit in this man's death.

BOLDUAN: Sad nonetheless, how this has all turned out. Lou, thank you so much.

PALUMBO: You're welcome, thank you. Always a pleasure, Chris.

CUOMO: Always.

BOLDUAN: Meantime, Philip Seymour Hoffman will be remembered tonight on the Great White Way. Broadway theaters will dim their marquis lights for one minute in memory of the actor. Hoffman was nominated for a Tony award tree times. He most recently appeared on Broadway - on the Broadway stage two years ago in "Death of a Salesman."

PEREIRA: All right!

Let's take a look at what is trending. A tug of war is building in downtown Miami over a major prehistoric discovery. An unearthed 2,000-year-old Native American village right in downtown! Next week a preservation board will hear developers proposal which will carve our parts of it. The owners of the site want to build a commercial space and hotel there. For months, archaeologists have been digging up a series of large circles that they say may have served as the foundation of Tequesta (ph) Indian homes. That's a story we want to keep an eye on. Nischelle?

NISCHELLE TURNER, CNN ENTERTAINMENT CORRESPONDENT: Yeah, Michaela, that's going to be a battle, but I'm telling you about a celebration. Seattle set to honor the Super Bowl champs. A parade for the Seahawks will be held today, three days after their dominating 43-8 win over the Broncos in the Super Bowl. It kicks off at 11:00 a.m. local time, heading through downtown Seattle, and finishing at Century Link Field. And in a rare treat for Seattle football (ph), the forecast calls for sunny skies.

PEREIRA: That's a rarity in the pacific northwest.

No, Polly-O, say it ain't so! A Kraft string cheese recall has apparently led to a shortage. The company voluntarily recalled 22 Kraft and Polly-O strings products three months ago because apparently they spoiled before their best used by date. So production was halted as Kraft investigated a cause. They expect the product will be back in super markets next month. So, you'll be able to get your string cheese.

TURNER: I love that and I love this.

Listen to this, Bill Clinton may be the least sorry person to see Jay Leno go, as host of "The Tonight Show." George Mason university just analyzed 43,892 Leno jokes about public figures and public affairs over the last few decades, and discovered that the former president was the comedian's number one target. He got skewered 10 percent of the time. Rounding out the top five Leno victims, George W. Bush, Al Gore, Barack Obama, and Hilary Clinton. Leno's last show, of course, airs tomorrow night.

PEREIRA: The end of an era. Well, Nischelle, we know you were in New Jersey for Super Bowl. Remember the Red Hot Chili Peppers performing there? Well, they have come clean. The group's bassist, Flea, admits the group's music was recorded and not performed live for the Super Bowl because they said the NFL told them it had to be. On their website, Flea says the league only had a few minutes to set up the stage, and too many things could go wrong with the sound, but he insists the vocals were performed live.

There were a few people, in fact, another musician pointed out that there was nothing plugged into his guitar.

(CROSSTALK)

CUOMO: I'll tell you what, I go with them. Huge fan. Disclaimer. But they pre-recorded it themselves --

BOLDUAN: It doesn't bother me --

CUOMO: The lead singer was singing the whole time. This is the only way the Super Bowl would allow it.

TURNER: Exactly. And they do do that. The NFL and the Super Bowl Committee usually say, we don't want anything to go wrong, just in case there's something with the vocal we need you to pre-record it. They do that a lot.

(CROSSTALK)

BOLDUAN: This kind of thing -- there's a lot more we could get outraged about.

TURNER: While we were in the building, they rocked it.

<07:20:00>

CUOMO: As Flea says, come to our shows if you want to have your mind blown.

BOLDUAN: Let's talk about this one. The newest winner of TV's "Biggest Loser" is stirring up controversy on social media this morning, a whole lot of it. Just take a look at Rachel Frederickson's extraordinary transformation. This morning, she's $250,000 richer, and 155 pounds lighter, but that has a lot of her fans concerned about her health. Nischelle has more on this story that's been trending.

TURNER: You know, guys, at first when I saw this, I thought, you know, what are people concerned about? She's lost a lot of weight, she got in shape. That's a good thing, right? But then I saw that before and after picture and it's shocking at first. It kind of takes you back and it definitely gives you a little something to think about.

(BEGIN VIDEOTAPE)

TURNER: Their faces say it all. Big shocker and possibly bigger controversy on "The Biggest Loser" last night. Brand new winner, 24- year-old Rachel Frederickson astonishing everyone revealing a staggering 155-pound weight loss. Frederickson, a former swimming champ, broke a new record for the show by shedding 60 percent of her total body weight.

RACHEL FREDERICKSON, "BIGGEST LOSER" WINNER: Choosing to own my task, and to move forward in this life and know that I can take control and do anything that I want. It's just - it's been amazing.

TURNER: But some people are less amazed and more concerned, fearing Frederickson has lost too much weight. Stunned viewers took to Twitter to voice their alarm saying 'watching "The Biggest Loser" finale and I am seriously concerned that the confetti will knock Rachel over.' And 'this is the first time I've seen a contestant go too far. Genuinely upset about this one.' Also, 'I think it's kind of sad how young girls and teens are watching this as an example. NBC should probably know better.'

So far, no word from NBC or "The Biggest Loser," but this isn't the first time the reality series has come under fire. Last November, star trainer Jillian Michaels got into trouble for giving her team caffeine supplements without a doctor's permission. Her team was penalized, though Michaels insists the pills were safe.

JILLIAN MICHAELS, TRAINER: Caffeine supplement is significantly healthier than unlimited amounts of coffee. My only regret is that my team, they are the ones suffering the consequences of my professional opinion.

(END VIDEOTAPE)

TURNER: Okay, so we showed you some of the Twitter messages there, but the bloggers and the folks on the message boards were really busy last night. The majority of them saying they thought that Rachel took the weight loss too far. We were all talking about it during the package there.

You don't know what to say because you like to see people get healthy and get in shape. I can speak personally to this. About four years ago, I lost some weight myself. I didn't realize that I had lost too much until people told me, you need a cheese burger. Like, and sometimes you just don't know. PEREIRA: 155 pounds in less than six months is aggressive, and I don't know if that's sustainable. And it does worry me about (INAUDIBLE)

(CROSSTALK)

BOLDUAN: I hope this doesn't hurt the show because it is one of the few -- we can call it a reality show if you will, that everyone comes out a winner. It really does promote very --

PEREIRA: Sometimes the people but the weight back on on that show. I mean, yes, you're right there.

CUOMO: That's the problem, right? The problem that we want to get around in this country and we just can't is you will not find a temporary fix that will last long term. The word diet means every day. So, you know, this woman was a very highly-trained athlete, I don't know what led her to fall out of shape that way. I don't know what her level of dedication will be going forward. But you have that reality and then you have this other reality about what are we supposed to look like? And a lot of people will look at her at 105 pounds, sounds thin to me, you know but - and say, that's what I want to look like. Well is that healthy? Some will look at the other picture of her and say I don't want to look like that. Well, is that healthy? So, we got a long way to go.

TURNER: Kate's right, though. The do have certified trainers, they have doctors, they do do it right on that.

(CROSSTALK)

TURNER: As far as taking care of the people.

CUOMO: What do you think? Please tweet us. Use the hashtag #newday as always. We're going to take a break here, give you a chance to respond to us. And we're going to talk business when we come back.

Coming up, a strong year for stocks. Suddenly the Dow is taking a nose dive. Why, and what do these recent struggles say about the state of the overall economy and how it may affect you and your job? We have a top financial honcho joining us for insight.

(COMMERCIAL BREAK)

<07:27:40>

CUOMO: Welcome back to NEW DAY. After huge gains in 2013 the stack market is struggling in the new year. What's going on? Monday was the largest market selloff since June. The Dow fall a whopping 326 points. Of course, not good for your 401(k). The real issue is, how is the overall economy doing? Is there a reflection from one to the other? Joining us now with insight, chairman senior partner at PricewaterhouseCoopers, Mr. Bob Moritz. Great to have you here.

BOB MORITZ, CHAIRMAN/SENIOR PARTNER, PRICEWATERHOUSECOOPERS: Happy to be here. CUOMO: Let's unpack that question. Look at the stock market but you understand what businesses think and how they're feeling about the overall economy. Give us perspective.

MORITZ: We just completed a CEO survey all around the world. First of all, the general global economy very optimistic. There's some caution in there and some fragility in there. Go to the U.S. economy. If you look at the 200 some odd CEOs we surveyed, 89 percent of them are confident they're going to be able to raise revenue in the next 12 months. So the confidence levels continue to increase, which is a trend over the last couple years. The question that has the follow-up is, are they willing to hire.

BOLDUAN: Right.

MORITZ: Coming back to unemployment issues and the like. What's interesting is year over year, 60 percent of those CEOs have said we're going to hire more people compared to low 50s, high 40s over a year ago. So that confidence level continues to increase. The question is how big is the scale, and how much are we talking about on a relative basis.

BOLDUAN: Do you think January has been a rocky start for investors. Do you think that will change that -- that view?

MORITZ: I don't think so. I think you have a fundamental disconnect between the CEO confidence and investor confidence. There's a lot of nervousness in the investing community. What's the impact in terms of global markets, foreign currency trading and the like. What's the impact of quantitative easing. But your CEO community, in terms of a long-term view, and I'll even go to the medium-term view, there's a long-term perspective here that I'm not going to change in order to react to a short-term volatility in the marketplace. And let's be honest, you're going to have that in the next year when you look at the rise that we've had in the stock market compared to year over year.

PEREIRA: So, let me ask you then, there's this confidence with CEOs but the folks watching at home are saying, unemployment is what it is, I'm not feeling great about the economy. I'm struggling to make ends meet. How do we bridge that gap between the two?

MORITZ: It's a great question we get time and time again. The CEO's confidence is coming from a resiliency over the last couple years in terms of the ability to manage through this. And the question to the average consumer and the average person trying to look for work, there's a disconnect there. So the big challenge is how do communities, how do government, and how businesses come together to create the opportunities?